The Articles of Agreement for establishing the China-led Asian Infrastructure Investment Bank (AIIB) were signed on June 29 by 50 member states, including countries from within Asia such as South Korea, India, and Australia, and countries outside the region such as the United Kingdom, France, and Italy. Headquartered in Beijing, the new bank is part of a major ongoing evolution in China’s economic diplomacy. Seven additional countries that had expressed an interest in becoming founding members have yet to formally sign on – including the Philippines, which has expressed concerns that the AIIB’s lending could be impacted by the “vagaries of politics” between Manila and Beijing.
China’s voting share in the AIIB, calculated based on a formula set out in the bank’s Articles of Agreement. This takes into account China’s status as a “founding member” and its $29.78 billion stake in the bank (out of the AIIB’s $100 billion capital base). This makes Beijing the AIIB’s single-largest shareholder, with around 3.5 times the stake of India, its second-largest contributor. Based on the AIIB’s governance structure, as laid out in the Articles, this will give China veto power over major AIIB decisions.
|Country||Initial Capital Subscription ($bn)||Capital Share (%)||Voting Share (%)|
Source: China’s Ministry of Finance, 2015. *AIIB calculates each member’s voting power by taking the sum of its basic votes, share votes, and founding member’s votes. Voting shares presented above are as calculated by the Korean Ministry of Strategy and Finance and reported in the JoongAng Daily.
For comparison, the Asian Development Bank (ADB) has a capital base of $153 billion and the largest single voting share is held by Japan, which has 12.84 percent. The United States has the ADB’s second-largest vote share in the ADB, with 12.75 percent. China, which is also the ADB’s second-largest borrower, has a 5.48 percent vote share.
The size of the AIIB’s resident board of directors. Instead of a full-time, resident board of directors representing member countries – a feature of both the World Bank and the ADB – leading Chinese officials, including Finance Minister Lou Jiwei, have emphasized that the AIIB will have a non-resident board of directors that will meet only to discuss major issues. This makes the AIIB unique among other multilateral development banks. Supporters have argued that having a non-resident board will reduce costs, raise the accountability of management, and boost efficiency, whereas some have raised concerns that the lack of on-the-ground representation for members will weaken the AIIB’s governance and accountability.
The annual gap between projected levels of infrastructure spending and what the ADB estimates is the “required” level of infrastructure investment in Asia and the Pacific through 2020 (in order to meet certain growth and development targets). While much of the discussion of infrastructure investment to date has focused on financing, in reality the barriers to infrastructure investment are more complex. They include a limited supply of commercially viable projects, complex operating environments in many developing countries (for example, complicated land-rights rules), and the political risks of making long-term investments in often unstable political settings.
To put the gap in context, the ADB currently lends around $13 billion for infrastructure projects every year. Total annual regional spending on infrastructure in the Asia-Pacific is over $1 trillion. Alongside planned increases in the ADB’s lending capacity, the AIIB will add to the pool of available resources, but will account for only a small fraction of total spending and will take time to become fully operational after it is formally establishment in end-2015.
The number of people in Asia and the Pacific who do not have access to electricity, according to the International Energy Agency’s 2014 report. Over 60 percent of households in the region lack access to a secured water supply and modern sanitation. The AIIB has raised important questions regarding the regional and global economic order and what role China will play as its ambitions and material capabilities continue to grow. As the AIIB seeks to begin investing, it will also have an impact on the welfare of some of Asia’s poorest and most vulnerable populations. Whether it lives up to the promised high standards will influence whether it succeeds in making a positive difference – and whether the AIIB can avoid the problems that have often resulted from poorly planned or implemented projects, particularly the large-scale infrastructure projects it will seek to target.